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GTM: Segmentation, MVS, Targeting

Minimum Viable Segment & Demandware case example

GTM: Segmentation

In this part of Go To Market, we discuss the importance of Segmentation and Targeting to accelerate your customer traction.

You've probably heard of Minimum Viable Product or MVP. But MVS? Minimum Viable Segment is just as important and can help you further narrow your first product development required to get repeatable traction. For more information on MVS - see below the video.

As our case example, Jamus Driscoll SVP Marketing at Demandware shares how critical it was to segment in great detail to find their initial customers.

The Importance of Minimum Viable Segment (MVS)

I find too many entrepreneurs who follow the lean methodology stuck in a product spin, and consumed with their Minimum Viable Product. And it’s ironic, because while I often hear about the importance of product market fit, not enough consideration is given to the designation of the market side of this equation. Yet we all know your product isn’t going to fit the entire market from day one! So while the MVP is critical, it’s missing its dance partner, what I call the Minimum Viable Segment (MVS).

MVS is about focusing on a market segment of potential customers that have the same needs to which you can align. Defining and focusing on your MVS is vital because without it, potential users who have divergent needs will quickly pull your MVP in many different directions. This in turn will bloat rather than minimize your product requirements and drain your limited startup resources. And that sucking sound won’t just be felt in product development but also in any Go To Market (GTM) activities, and then later on in service and support, potentially paralyzing your Business Model.

Here are just a couple of examples. Securing strong reference customers is critical in the early days of your GTM activities. And they can’t reference each other if they don’t have the same needs! Likewise, when it comes time to service and support them, if you’ve had to build different solutions to their different needs they aren’t likely to have the same service and support problems. As a result, they’ll stretch your services teams. Instead, if they had the same needs and solutions, guess what – they may even be able to support each other in a customer community. That could save you a lot of time and money - especially if it fosters a “self service” community, which I usually encourage my startups to create.

Find the same, similar or very closely related needs

What can you do about this? Focus. Focus on finding a set of customers who have the same or as similar a need, pain or problem as closely matching that of the other customers in your MVS.

To be explicit about this, it is the same NEEDS you are looking to fulfill and not for example features you want to build. What’s the difference you ask? For starters, customers don’t think in terms of features. They think in terms of pain and need. And while a feature might address their initial need, it’s not likely to stay on course with their needs as they evolve if they’re different to other customers. And as you’ll see below, it also becomes important beyond your product alone.

Is MVS another way of saying “Vertical Market”?

Your MVS might be a vertical, or be partly defined within a vertical, but it needn’t be and that isn’t likely the only way to define and focus on your MVS. For starters if you pick a vertical like Financial Services, it’s too broad to be an MVS. You’d want to break it down into Banking, Brokerage, Insurance etc. And then keep breaking it down further until you found a set of potential customers with the same need. For example, take the need for regulatory compliance. Then try to drill deeper into that need to find the pain. Is it the compliance itself or the reporting? What specific regulation is it? PCI or Basel II?

These will all have very different needs.If you took the PCI compliance path, it actually applies outside Financial Services, for instance in eCommerce. And that is the starting point to think about needs that cross verticals. In fact your segment could ultimately be anywhere where PCI compliance is needed. Hence not constrained to a vertical at all but to a segment where anyone needed PCI compliance.

Minimum = small enough to dominate

The Minimum part of the MVS is about keeping your segment as small as possible to be able to dominate it. Once you dominate it you can claim leadership. Even if this leadership is just in your MVS, it’s valuable to your positioning and referenceability for the next segment you want to go after.

So in our example of PCI compliance you might choose to limit it to one of the verticals as well and just do PCI compliance for eCommerce if all those customers exhibit the same need.

Viable = where you can succeed with your MVP

As you ponder your MVP, look at which segment will have the least product requirements. So again in our example, is that PCI compliance for Financial Services or eCommerce?

Let’s say you determine eCommerce applications are a better bet as a small startup as they are less stringent and perhaps you have some related domain expertise on your team, making it more likely to set you up for success.

Iterate your MVS, just like your MVP

Let’s try refining our PCI compliance for eCommerce MVS. Could we see all customers having the same requirement? Perhaps as we interview, we find that we have ISVs offering eCommerce solutions and we also see Merchants having the same need. Which should we focus on? Again maybe as we iterate we find we’re better suited to serving the ISVs and even gaining some leverage as part of their solution rather than going direct to Merchants. Or you may need to drill further and figure out if there’s a certain size or type of eCommerce ISV that really has the same needs. Refine and refocus your MVS accordingly.

What else comes into play?

Honestly there can be many factors to help you with your MVS. At least a few I’d recommend thinking about are:-

How tightly knit are the customers in your segment?

Do they talk to each other in (for example) community forums, trade associations and the like? The closer tied they are, the more likely they are to reference each other efficiently. Think of this as the beginning of your viral loop.

Channels to your MVS

Following the point above, if your MVS can all be reached via the same channel that can be a big boon to your marketing focus.

And of course there can be other factors that could help, like finding an MVS in a single close geography so you can easily reach them - a critical attribute in a high-touch oriented solution.

Thinking ahead to adjacencies

If you can think ahead from where your first MVS is to the next ones, it can be very helpful to pick adjacent segments that closely align to each other and could have at least similar attributes so that you can leverage work from one MVS to the next.

Conclusion

Minimum Viable Segment is such an obvious concept once you see it in practice. However, it’s amazing how I see it elude entrepreneurs in one form or another. In particular, they tend to see everything as a product problem, rather than stepping back to look at where their product is targeted. Others simply can’t resist the temptation to take money from customers and stray from their MVS in the belief that they will succeed regardless. Yet with some simple work on an MVS to intersect with your MVP you can really get focus on the right product issues to address – e.g. those that will address the common needs of your MVS customers. And you’ll build a much more profitable GTM and Business Model thereafter.